Email this article to a friend

As assets grow, TSP resists calls for change from Congress

By
Jack Moore

Boosted by a recovering economy and a booming Wall Street, assets in the Thrift
Savings Plan have continued to climb. Since reaching $400 billion in
February — the highest amount ever recorded — assets under TSP
management grew to more than $412 billion by the end of last month.

That's according to new data presented Monday at a monthly board meeting of the
Federal Retirement Thrift Investment Board.

But as total assets have increased, so have calls to tweak the program that's
provided federal employees with 401(k)-style retirement accounts since 1987.

"You can bet the interest in the TSP will continue to grow," the board's director
of external affairs, Kim Weaver, told board members, after recapping some of the
recent attempts to overhaul the program.

"Since the beginning, there have been efforts to add funds or to restrict
investments in the TSP," she said.

They include calls for the TSP to both disinvest from companies — such as
those doing business in Northern Ireland during the long conflict with the United
Kingdom and in South Africa during apartheid — as well as prodding the board
to add specialty funds, such as a mortgage-backed securities fund, a corporate-responsibility fund and a
real-estate investment trust, or REIT fund.

"Some of these disputes became fairly heated," she said.

Senate committee to vote on making L Funds default option

But the TSP has held firm that tweaking the TSP's tried-and-true structure "may
not be the best course of action," she added.

The TSP board opposed those past efforts because they didn't fit with TSP
structure or policy, Weaver said.

And while the aims of socially responsible funds or efforts to disinvest may be
rooted in noble aims and aren't necessarily bad investments, the TSP's main
operating principle is to act as a fiduciary for all participants. Excluding
certain companies under a program of divestment, for example, would have added
extra administrative costs.

"Our evaluating criteria will continue to be what's in the best interest of our
beneficiaries," Weaver said.

But the TSP isn't looking askance at all legislative efforts

As it stands now, the board is considering offering a mutual-fund window to participants that could make
moot the legislative push for more customized investment options.

If adopted by the board, the TSP five core funds would remain intact, but a
participant could, for a fee, invest in mutual funds offered by a third-party
provider. In fact, allowing TSP participants greater access to mutual funds could
actually help preserve the TSP as a simple, streamlined plan, because participants
could use the window to access a range of funds not available through the regular
TSP.

The 2009 TSP Enhancement Fund, which authorized established a Roth TSP option,
also allowed the board to consider adding a mutual-fund window. But the board has
moved cautiously. TSP Executive Director Greg Long has said he plans to offer a
recommendation to the board in the fall.

Another legislative change the TSP board is welcoming is making an age-appropriate
L
Fund the default investment option for new federal hires. Currently, new employees
are slotted into the lower-risk, lower-reward government-securities G Fund. The
board approved the switch in
December, but it requires legislation to take effect.

The Senate Homeland Security and Governmental Affairs Committee plans to vote Wednesday on the Smart
Savings Act, introduced by Sen. Elizabeth Warren (D-Mass.) The House Oversight
and Government Reform Committee approved its version
of the bill, sponsored by committee Chairman Darrell Issa (R-Calif.) in March.

There is no word yet on when the full House plans to vote on the measure.

TSP growth by the numbers

Total assets under TSP management grew to more than $412 billion by the end of
May, a 1.5 percent increase over the previous month. The participation rate for
workers under the Federal Employee Retirement System ticked up to 87.4 percent,

The average TSP account balance also rose, now standing at more than $111,000.
That compares favorably to the average private-sector 401(k) balance of about
$89,300, according to a February 2014 CNN report.

"I think it does tell us that we're doing a little bit better than the private
sector," said Tom Emswiler, the board's director of participant operations and
policy.

But there's one figure that's bucking the trend line. Even as total assets have
grown, more TSP participants are taking all or some of their money out of the TSP
when they separate from federal service.

Post-separation withdrawals, as they're called, are currently running $2 billion
higher than this point last year.